The American Apparel and Footwear Association (AAFA) called AGOA a “success story” for the apparel and footwear industries in a letter to William Shpiece, chair of the Trade Policy Staff Committee. The letter explains its duty-free access combined with state-of-the-art flexible rules of origin, were the “main reason why members are in Africa and why they are now looking at expanding, or continuing to expand, their business there.”
In 2022, US apparel imports under AGOA surpassed pre-Covid levels in volume and value. In 2021, 93.1% of all apparel from AGOA countries entered under the AGOA programme.
While utilisation rates fell to 68.3% in 2022 it is believed that most of that decline was due to Ethiopia’s exports entering the US outside of the AGOA programme. Ethiopia’s s AGOA benefits were revoked on 1 January 1 2022 following a humanitarian crisis in Tigray and nearby regions.
Update on Ethiopia sourcing
The AAFA points out that US apparel and footwear companies invest, produce, and source all around the world, including in Ethiopia and their investment and business decisions are always grounded on solid and demonstrated human rights.
“These investments provide significant opportunities for supply chains that create and sustain responsible employment. With that investment, there can be no hesitancy to ensure that the values embraced by our partners – including our government partners – match our own perspectives.
“For many years, this has been the case in Ethiopia as the apparel and footwear industry has continued to increase its expectations and outlook for Ethiopia to be a stable and progressive investment partner. These joint efforts created the ability to lift many out of poverty and supported sustainable economic opportunities for Ethiopian households and communities. The jobs we have jointly created rest and depend upon that premise.”
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By GlobalDataThe AAFA said it voiced its concerns with the Ethiopian government and notes the crisis is “inconsistent with our values and expectations”.
“We understand that some progress has been made on the benchmarks outlined in an official letter sent to Ethiopia in 2021,” the AAFA said. “We are hopeful that the Ethiopian Government continues to make progress and meet all of the benchmarks in order to reinstate its AGOA benefits as soon as possible. Our companies are committed to Ethiopia and its workers. However, if Ethiopia cannot regain its benefits, the costs to do business there will eventually become too great for many.”
On AGOA, the AAFA said while it will not happen overnight, it does believe the utilisation rate will rebound if Ethiopia’s benefits are restored in 2024.
The China diversification challenge
The AAFA said while the AGOA expiration date its two years away, US investment in the region faces mounting uncertainty.
“Companies are poised to diversify out of China, and Africa is a logical place for many of them. The on-again, off-again nature of the [AGOA] programme before the ten-year renewal was extremely disruptive and meant the [apparel and footwear] industry was not able to take full advantage of the first 15 years of the programme. The 10-year renewal, with state-of-the-art rules of origin, in 2015 was an important first step but was not nearly long enough – as we repeatedly noted in 2015 – to sustain the kind of long-term trade and investment that is needed to alter centuries of underdevelopment. If AGOA were to be renewed this year for at least another 10 years (although ideally longer), companies would have the necessary certainty and timeframe they need to grow a vertical, responsible, and competitive industry in Africa up to and past 2025.
“As more [apparel and footwear] companies are beginning to utilise AGOA, and specifically the third country fabric provision, the quota fill rate will be significantly increasing in the coming years. Therefore, we also suggest raising the existing 3.5% limit to at least 4.5%, with a growth provision, so that it not be a constraint going forward.”
